Detroit exits active state financial oversight for first time in 40 years

• City has now exited every form of state and federal oversight, including water department, police department, housing commission and more

• City’s elected leaders have full control of all city departments and services for the first time since 1977

The State Financial Review Commission, which was created in late 2014 to oversee Detroit’s finances as it emerged from bankruptcy, voted unanimously today to end active oversight after the city delivered its third consecutive audited balanced budget. During its three years of active oversight, the FRC had final decision making power on all city budgets, collective bargaining agreements and contracts larger than $750,000.

The FRC will continue to exist for a 10-year term, although it will play no active role in City of Detroit operations. The city will be required to submit monthly financial reports, and will also submit its adopted budget and 4-Year Financial Plan each year. So long as the city continues to balance its budgets and meet other basic fiscal requirements, the FRC will stay inactive for the rest of its existence.

Not only does the end of active state oversight signal the end of the last vestige of the city’s bankruptcy, it brings to an end a 40-year stretch where some aspect of city government was under the oversight of a state or federal entity, including:

• 36 years of federal court oversight of the Water & Sewerage Department over environmental issues

• A decade of US Justice Department oversight of the Police Department regarding police use of force and lockup conditions.

• Nearly a decade of HUD control of the Detroit Housing Commission due to poor performance

With the end of the FRC’s active oversight, Detroit regained the ability to negotiate contracts and make budget changes without the commission’s approval. Mayor Mike Duggan called the end of all active oversight a great milestone in the city’s continued progress and a testament to the city’s new commitment to strong fiscal management.

“For the first time in four decades, Detroit’s elected leadership will be in complete control of government functions,” said Mayor Mike Duggan. “Thanks to the outstanding team we’ve assembled here at the city, the leadership of our partners on Detroit City Council and our hard working city employees, Detroit is once again finally a city of full self-governance.”

The mayor also thanked members of the FRC, appointed by top state officials, for their professionalism and dedication to ensuring fiscal responsibility in Detroit. Not once in its three active years did the commission find cause to veto a budget or contract.

“Today is an important day in the history of our city,” said Detroit City Council President Brenda Jones. “Now, with the dormancy of the FRC and a reduction in state oversight, local control is returning to our city and its elected officials can assume the role that voters expect us to carry out. With five years of partnership under our belt, the legislative and executive branches will continue to work together to ensure Detroit’s financial recovery remains solid. My colleagues and I are committed to conducting the due diligence required to balance the budget, while ensuring that services are delivered to meet the needs of all Detroiters.”

In addition to delivering three balanced budgets with surpluses, the city also has created a 10-year budget forecast to ensure continued stability, garnering the attention of national credit rating agencies, which have significantly upgraded the city’s bond rating.

The city’s General Fund balance was up to $592.8 million at the end of FY 2017 vs. a $73 million total fund deficit at the end of FY 2013. Property tax collections increased nearly 10% over the last four years and income tax revenues increased 15 percent over the same period.

“Today marks a milestone for the people of Detroit and the resilience of their city. It wasn’t long ago we entered into the Grand Bargain to lift up a bankrupt Detroit, and over the past few years, the state, city and members of the commission continued to work together to set a framework for success,” Gov. Rick Snyder said. “Today’s vote validates Detroit’s remarkable progress and path toward continued financial stability. Detroit is America’s Comeback City and I have every confidence that we will continue to see Detroit reach new heights under the city’s leadership.”

The path to self-governance in Detroit

Starting in 1977 with federal court-ordered oversight of the Detroit Water and Sewerage Department, the City of Detroit has been under some kind of federal or state oversight. In that period, Detroit faced oversight in seven different areas, including; the Detroit Water and Sewerage Department, the Detroit Police Department, the Detroit Housing Commission, the Detroit Department of Transportation, the Assessment Division, the city’s finances and the entire city under the emergency manager.

Beyond the departure of the emergency manager and financial stability that led to the end of the FRC’s oversight, reforms among the departments and improved efficiencies in city services led to the removal of additional layers of oversight. The Detroit Housing Commission improved financial and management requirements, which led to the commission receiving its first passing HUD inspection score for every public housing development in decades. The Detroit Police Department drastically reduced uses of force and established new offices to review and maintain best practices, leading to the end of the federal monitor at DPD. DDOT improved bus maintenance and improved on-time bus departures to remove the federal oversight of that department. And the Assessor’s Office initiated a city-wide reappraisal initiative in 2014, a process that had not been undertaken since the 1950s.